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Greece to get next instalment of loan in July

Officials from the EU, the European Central Bank and the International Monetary Fund have said that Greece should receive the next instalment of its €110 billion loan package in early July.

The positive statement by the team, which has been assessing the state of the country’s finances and looking at the implementation of a package of reforms, means that Greece will not run out of funds to keep the country’s administration going.

The statement did not give details of an additional loan package for Greece. Media reports suggest that Greece could obtain a further €25bn-€30bn in financing for the next three years.

More reforms needed

The team said that Greece had made “significant progress” in fiscal consolidation. It added, however, that “reinvigoration of fiscal and broader structural reforms” was necessary to reduce Greece’s deficit, improve the business climate and pave the way for sustainable economic recovery.

The team’s report noted some encouraging economic developments including an increase in exports, a decline in unit labour costs, and falling inflation.

The statement said that the Greek government needed to carry out “comprehensive structural reforms” to continue reducing its deficit. It said that the government had agreed a medium-term strategy involving a “significant downsizing of public sector employment, restructuring or closure of public entities and changes in welfare entitlements”. The government would also reduce tax exemptions, raise property taxes and step up efforts to fight tax evasion, the team said.

The government will also have to accelerate its privatisation programme, the team said. A “professionally and independently managed privatisation agency” will be created to manage the privatisation process, which aims to generate €50bn by the end of 2015.

The team said that the government had made progress with structural reforms, mentioning legislation to modernise public administration, reform healthcare, improve the functioning of the labour market, remove barriers to setting up and running businesses, and liberalising the transport and energy sectors. It said the government would press ahead in these areas and concentrate on driving growth by reviving the tourist industry and removing barriers to exports.

The statement said that discussions on the Greek government’s financing would take place over the next few weeks. The next tranche of the loan package would be available in early July, following approval from the IMF’s executive board and the Eurogroup, the team said.

Olli Rehn, the European commissioner for economic and monetary affairs, said: “The latest commitments by the Greek authorities are essential to restore fiscal sustainability and create the conditions for sustained growth and improving employment in Greece. They are crucial decisions at a critical moment to safeguard financial stability and economic recovery in Europe.”

Rehn called on “all political forces in Greece to put aside their domestic disputes and endorse the main objectives and policies of the programme, for the sake of the recovery of the country, for the sake of growth and employment”.

The opposition New Democracy party has been against supporting further reform, arguing that tax increases would stifle economic growth.